Blue Skies
or Bust

Optimism Should Be Running High

Volume 134, No.
23 Friday, December 4, 2009

Optimism is the only choice for the dairy industry as it looks to the end of a chaotic year for dairy farmers and the beginning of a new year of milk marketing. For many farms, a turn for the worse in 2010 is not an option.

Wisconsin, Minnesota and other Midwest states continue to exceed year-earlier milk production levels in a record-low milk price year, and farm owners at the Annual Business Conference of the Dairy Business Association (DBA) held Dec. 1-2 in Madison, WI, described a variety of strategies that have kept their farms viable and production up in 2009.

Wisconsin farms have added cows, altered feed components, more carefully managed forage, improved cow reproductive rates, maximized cow comfort, and even cut farm labor in the face of milk prices that will result in a net loss of money on each cow in the herd. According to one successful dairy farm owner at the DBA conference: “There’s not much cost-cutting left for our operation.”

Yet Wisconsin can look to positive government and industry signals for a strengthening business cycle in 2010. The November all-milk price in Wisconsin (and nationally) is 2009’s highest and as of this writing the cash market for Cheddar cheese blocks remains strong. A banker presentation at the DBA annual conference forecast positive net income per cow in 2010, but lingering high debt per animal.

Within weeks, dairy producers nationwide can expect, in addition to any MILC payments, a check of up to $4,000 from USDA based on the $290 million Congress appropriated this fall for direct dairy farm aid. USDA has an additional $60 million appropriation to purchase dairy commodities ASAP.

December has begun with two additional positive business developments: Wisconsin’s Trega Foods, the US subsidiary of Agropur cooperative, announced the acquisition of Green Meadows Foods in Hull, IA. The new Iowa cheese plant is a natural fit with Trega’s operations and product profile.

At the same time, Rosendale Dairy, the new 4,000-cow farm in eastern Wisconsin has completed phase-two construction to add an additional 4,000 animals. The Wisconsin dairy industry is expected to turn out in force to support a final permit hearing for Wisconsin’s largest dairy farm.

The large cheese and whey production expansion recently completed at Valley Queen Cheese Factory in Milbank, South Dakota, points to the optimism in infrastructure throughout the Upper Midwest.

Ultimately, a recovery in milk prices and farm profitability will depend on a strengthening of domestic and international demand for dairy products. But state and federal governments also can play a role in shoring up the dairy economy.

In Wisconsin, the opportunity for “dairy stimulus” coincides with the fact that Wisconsin will face in 2010 its first “open” race for governor (no incumbent on the ballot) in 27 years. State level dairy policy, from agricultural siting legislation to tax credits both for dairy farms and dairy manufacturers, has played a key role in Wisconsin’s renewed and growing dairy industry.

So what new dairy policy tools could a new governor employ? Here’s a few suggestions:
• Wisconsin’s influential Dairy Investment Tax Credit, initiated in 2004 to offset income tax for farms that modernize and grow, is set to expire in 2009. Extend and fund this incentive program through 2014.

• Set a target of five model waste-to-energy generation facilities in Wisconsin’s dairy processing industry by combining industry investment with state and federal green energy funds.

• Add additional dollars to the current state tax credit program for Wisconsin cooperative and proprietary dairy processors to incent growth in an industry that’s a sure bet to build facilities and add jobs in Wisconsin.

• Ease back the throttle on proposed phosphorus regulations that threaten billions of dollars in costs to comply for municipalities, food processors, dairy manufacturers and dairy farms.

• Support the proud industry effort to rebuild and expand legendary Babcock Hall, the dairy research and production plant at the University of Wisconsin-Madison.

The Upper Midwest dairy farm and lending community has shown resilience and grit in 2009, producing safe and wholesome milk as debts mounted. Optimism for a new year with greater demand and higher farm prices must be matched by state and federal government leaders willing to assist with debt recovery and reinvestment in the future. r

John Umhoefer has served as executive director of the Wisconsin Cheese Makers Association since 1992. You can phone John at (608) 828-4550; Fax him at (608) 828-4551; or e-mail John Umhoefer at
jumhoefer@wischeesemakersassn. org

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